Canadian Oil Sands rails against Suncor’s latest takeover tact
Tags: Canadian Oil Sands, Suncor Energy
CDN OIL SANDSStock data delayed up to 20 minutes
$9.35
$0.19
1.99%
COS.TO: 9.55 ● SU.TO: 35.45
chart type: 6month, Comparative
If shareholders of Canadian Oil Sands Ltd. (COS.TO -1.99%) haven’t already received a call from their broker, they should expect one soon.
Suncor Energy Inc. (SU.TO -2.17%), which launched a $4.3-billion hostile takeover bid for the largest member of the Syncrude Canada oil sands consortium last month, is offering financial incentives to brokers who convince their clients to tender their shares. The so-called dealer solicitation fee provides $0.05 per share to brokers whose clients tender at least 300 COS shares, with a minimum fee of $75 and a maximum fee of $1,500, according to a notice posted on the Canadian Oil Sands website.
COS has implemented a shareholder rights plan (otherwise known as a “poison pill”) in an effort to buy more time for management to search for a higher bid. The company considers the offer of 0.25 of a Suncor share per COS share to be “substantially undervalued, obviously opportunistic and exploitive” -- and now COS is accusing its suitor of attempting to buy support for its takeover bid since those fees are paid to brokers and not shareholders.
“Knowing the weakness of their bid, they feel it is necessary to pay brokers and incentivize them to encourage clients to tender their shares,” COS said in its notice.
“We don’t think that’s right.”
Dealer solicitation fees are considered a relatively common way of reaching out to retail investors, though the optics of appearing to buy support from brokers often generates controversy. In 2013, Calgary-based fertilizer giant Agrium was accused of using the practice inappropriately as it sought to fend off New York City-based hedge fund Jana Partners’ attempts to split the company’s retail and wholesale divisions into separate businesses. At the time, the Financial Advisers Association of Canada vowed to take a closer look at the use of dealer solicitation fees.
Suncor’s offer to buy COS, which would increase its ownership stake in Syncrude from 12 percent to 49 percent, expires on December 4, marking 60 days since the offer was made. The COS rights plan requires bids to be open for at least 120 days. The Alberta Securities Commission has scheduled a hearing for November 26 to decide whether to accept Suncor’s challenge of the rights plan and strike it down.
On Thursday morning, Suncor also warned that a rejection of its hostile takeover of Canadian Oil Sands Ltd. would leave the bid target’s investors exposed to weak oil markets and a possible share-price collapse.
In a letter to Canadian Oil Sands’ shareholders titled “hope is not a strategy,” Suncor chief executive officer Steve Williams says a rejection of the $4.7-billion all-share offer carries a “very real risk” of sending the target company’s stock into a tailspin from around $10 to its pre-bid level of about $6 per share.
Suncor Energy Inc. (SU.TO -2.17%), which launched a $4.3-billion hostile takeover bid for the largest member of the Syncrude Canada oil sands consortium last month, is offering financial incentives to brokers who convince their clients to tender their shares. The so-called dealer solicitation fee provides $0.05 per share to brokers whose clients tender at least 300 COS shares, with a minimum fee of $75 and a maximum fee of $1,500, according to a notice posted on the Canadian Oil Sands website.
COS has implemented a shareholder rights plan (otherwise known as a “poison pill”) in an effort to buy more time for management to search for a higher bid. The company considers the offer of 0.25 of a Suncor share per COS share to be “substantially undervalued, obviously opportunistic and exploitive” -- and now COS is accusing its suitor of attempting to buy support for its takeover bid since those fees are paid to brokers and not shareholders.
“Knowing the weakness of their bid, they feel it is necessary to pay brokers and incentivize them to encourage clients to tender their shares,” COS said in its notice.
“We don’t think that’s right.”
Dealer solicitation fees are considered a relatively common way of reaching out to retail investors, though the optics of appearing to buy support from brokers often generates controversy. In 2013, Calgary-based fertilizer giant Agrium was accused of using the practice inappropriately as it sought to fend off New York City-based hedge fund Jana Partners’ attempts to split the company’s retail and wholesale divisions into separate businesses. At the time, the Financial Advisers Association of Canada vowed to take a closer look at the use of dealer solicitation fees.
Suncor’s offer to buy COS, which would increase its ownership stake in Syncrude from 12 percent to 49 percent, expires on December 4, marking 60 days since the offer was made. The COS rights plan requires bids to be open for at least 120 days. The Alberta Securities Commission has scheduled a hearing for November 26 to decide whether to accept Suncor’s challenge of the rights plan and strike it down.
On Thursday morning, Suncor also warned that a rejection of its hostile takeover of Canadian Oil Sands Ltd. would leave the bid target’s investors exposed to weak oil markets and a possible share-price collapse.
In a letter to Canadian Oil Sands’ shareholders titled “hope is not a strategy,” Suncor chief executive officer Steve Williams says a rejection of the $4.7-billion all-share offer carries a “very real risk” of sending the target company’s stock into a tailspin from around $10 to its pre-bid level of about $6 per share.
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